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Renewable energy and data centres are emerging as the strongest investment opportunities in the infrastructure sector, while traditional sectors such as utilities, transportation, and waste management rank lower in investor sentiments, according to a recent report by UBS.
The report provided insights into the outlook for infrastructure opportunities over the next 12 months, highlighting the significant capital flow in businesses that align with global trends like decarbonisation and the increasing demand for artificial intelligence (AI) infrastructure. It said, "When looking at an industry survey on where managers would like to deploy capital, respondents overwhelmingly highlight businesses such as renewable energy and data centers since they benefit from themes such as decarbonisation and AI". It stated that renewable energy and data centres are attracting strong investor interest as they benefit from global initiatives toward cleaner energy and growing digitalization needs. These sectors are expected to remain at the centre of infrastructure investment strategies in the near term. However, the report emphasized that sentiment alone does not tell the whole story. A closer look at the fundamentals, particularly consensus earnings (EBITDA) growth, reveals a healthier outlook for the entire infrastructure sector. While renewable electricity and data centres continue to show strong growth, driven by investor confidence, other traditional sectors are also performing steadily. Conventional electricity stands out with the highest growth, fuelled by increasing power demand due to energy-intensive AI infrastructure. Similarly, sectors like roads, waste management, and utilities are showing resilience, delivering stable earnings growth despite lower investor sentiment. Even water utilities, despite negative perceptions, reflect relatively healthy fundamentals upon deeper analysis. "Conventional electricity is seeing the strongest growth, as it benefits from AI's strong demand for electricity. Even water utilities, where the sentiment is negative, looks relatively healthy in this analysis" it said. The report concludes that while renewable energy and data centres dominate the investment focus due to global trends, traditional infrastructure sectors remain promising. The strong earnings growth across sectors indicates a positive outlook for infrastructure investments in the coming year. (ANI)
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